Asian markets extended gains Tuesday as Americans prepared to vote in one of the most keenly watched elections ever, with traders betting on a Democratic sweep of the White House and Congress that would likely see a huge new economic stimulus.

Joe Biden has maintained his healthy lead over Donald Trump in national polls for weeks as the president is buffeted by his handling of the coronavirus, which is seeing a resurgence across the country.

A Democratic takeover of Capitol Hill "is the key to unlocking Congress' ability to deliver significant fiscal stimulus and benefit the US and global markets at a time of need", said Axi's Stephen Innes.

The US is in dire need of a fresh rescue package as the disease flares up again, threatening an already stuttering recovery in the world's top economy, with lawmakers having failed to agree anything despite months of haggling.

However, while investors are broadly betting the former vice president will win, his advantage in key battleground states is narrowing slightly, while there is also a worry Trump will contest the result -- having spent months hitting out at mail-in voter fraud -- leaving the country in limbo.

Observers said trading floors were nervous as investors remembered Trump's surprise win in 2016, and with many positioned for the "blue wave" of Democratic victories to take control of Capitol Hill, any other outcome could jolt sentiment.

"It's pretty much a binary outcome," Quincy Krosby, at Prudential Financial, said. "The question is, is the market right now looking at a Biden victory? And will it be disappointed if we don't have that?"

Still, others point out that the economy is set to get a fresh injection of cash whoever wins the election, while Edward Moya at OANDA pointed out that the Federal Reserve's ultra-easy monetary policy continues to provide support and will do for years to come.

He added: "The race for a Covid vaccine and treatments should have some winners in the next couple of months and that should provide optimism that the global economic recovery will only get better starting now."

After last week's rout, Wall Street bounced back Monday, with Innes saying that a positive performance in the travel and leisure sector indicated fears over the new wave of infections may have been priced in.

European markets also rallied, despite several top economies including England, France, Germany and Italy going into lockdown or some form of strict containment.

In early trade, Hong Kong rose 1.8 percent, having jumped more than one percent Monday and Sydney rallied 1.9 percent, while Shanghai, Seoul, Taipei and Singapore were also more than one percent up. Jakarta and Wellington were also positive.

Tokyo was closed for a holiday.

Donald Trump and Joe Biden
Donald Trump trails Joe Biden in national and battleground state polls, though investors remain wary of an surprise for the president after his shock win in 2016. Photo: AFP / Brendan Smialowski

And Gorilla Trades strategist Ken Berman sounded a positive note, saying "the bullish long-term trends remain intact, and the ongoing economic recovery should also provide tailwinds for stocks in the last two months of the year".

Oil prices held Monday's gains, after tumbling to four-month lows over recent days on demand fears. The commodity was boosted by news that Russia was considering extending a production cut agreed with OPEC this year by another three months.

Hong Kong - Hang Seng: UP 1.8 percent at 24,906.09

Shanghai - Composite: UP 1.1 percent at 3,259.39

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.1650 from $1.1639 at 2050 GMT

Dollar/yen: DOWN at 104.70 yen from 104.76 yen

Pound/dollar: UP at $1.2934 from $1.2918

Euro/pound: DOWN at 90.07 pence from 90.23 pence

West Texas Intermediate: UP 0.2 percent at $36.87 per barrel

Brent North Sea crude: DOWN 0.1 percent at $38.93 per barrel

New York - Dow: UP 1.6 percent at 26,925.05 (close)

London - FTSE 100: UP 1.4 percent at 5,654.97 (close)

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